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Gone are the days when retirements were synonymous with company pension plans and social security checks. Today, planning for retirement requires a well-thought-out financial plan, and is something that individuals in their 20s are encouraged to think about and start saving for as early as possible.
For a subset of people, saving for retirement defines their lifestyle. They adhere to the “Financial Independence, Retire Early” movement, more commonly known as FIRE. Typically, those who follow the movement advocate for an aggressive saving strategy, putting away anywhere from 50% to 70% of their total income. They invest that money in a low-cost index fund, with the intention that they will draw 4% from it once they retire.
Every individual who pursues FIRE has a different target number, but a common goal is 25 times their annual expenses.
The movement has gained traction among millennials, particularly in the aftermath of the Great Recession. But its popularity came with a share of criticism: Not everyone who follows FIRE blogs or writes about their experiences, but those who do (and in turn become prominent voices of the movement) don’t often represent a diverse demographic. Many are white, male, and work in jobs that bring in six-figure salaries.
As a result, their content and advice tend to reflect the experiences of that demographic. The focus is often on maximizing savings and an ultra-frugal approach to life. This means spending the minimum on necessary expenses and reducing (or in some cases, eliminating) “discretionary” expenses.
While they provide plenty of tips and tactics, they rarely discuss the nuances of what constitutes a “discretionary” versus “necessary” expense. There’s very little conversation on how factors like race and socioeconomic status play a part in the success of specific financial strategies — but some FIRE followers are looking to change the game.
Building stories of wealth reflecting Black and Latinx households, and dismissing the frugality mindset
Kiersten, 36, and Julien Saunders, 40, are a Black couple based in Atlanta, Georgia, who share their FIRE journey on their blog, Rich & Regular. They spent the early years of their marriage aggressively paying down debt, living below their means, and generating additional sources of income in addition to their full-time salaries to pursue financial independence.
Now debt-free and full-time entrepreneurs, they’re on track to hit their “target” number — $1.5 million — by 2021, though the couple has no plan to “retire” in the traditional sense.
The couple is hard at work on an upcoming book, and plans to continue to grow their online business even when they achieve financial independence. They’re especially passionate about encouraging the Black community (and other marginalized groups), to pursue FIRE as a way to build generational wealth.
The Saunders decided to share their experience when they realized that the media often portray a skewed narrative of Black wealth.
“Oftentimes, when the story of Black wealth is being told, it’s the story of extremes,” Julien told Business Insider. “We’re telling the stories of outliers who built massive wealth or stories of people who were extremely poor.” You don’t see stories of middle-class, high-income families, he said.
For Athena Valentine, pursuing FIRE came on the backs of a health scare. The 35-year-old nonprofit program manager and founder of a virtual assistant agency has blogged about her financial independence journey at Money Smart Latina since 2014 — a finance website geared toward Latinas with a readership of 5,000 people a month.
After she turned 30, Valentine experienced one series of health problems after another, including thyroid cancer and severe pancreatitis, which required doctors to remove her gallbladder. As she wrote in her blog, that’s when she started to think long and hard about the possibility that her health might interfere with her ability to work or require her to need more rest days than what a full-time employer allows.
“I really started to take a lot more stuff seriously in regards to my finances, and that’s when I really started to push for multiple streams of income,” she told Business Insider.
Like the Saunders, Valentine isn’t necessarily working toward “retiring.” Rather, she has a goal to generate at least $150,000 in passive income sources by the time she’s 40. Valentine said that she’s about 20% of the way there, and has recently hired two employees to help scale her businesses faster. She’s on track to leave her day job by the end of 2021, and is working on building systems in place where she will only have to work 10 hours a week.
Valentine heard about the FIRE movement before experiencing her health scares, but she was initially reluctant to pursue it.
“I found the movement off-putting because a lot of people who are very loud in the FIRE community came from a privileged position, and they don’t acknowledge it,” she said. For example, Valentine’s mom died when she was in high school, leaving her homeless for a few years. She also didn’t have access to traditional financial tools like a checking account until her early twenties. As a result, she couldn’t start making serious progress on her finances until later in life.
Valentine also felt that some of the messages that FIRE adherents preached — like a mindset of frugality at all cost — don’t always take into account different cultural realities. She pointed out that multigenerational households are the norm in Latinx families.
“That’s something a lot of people don’t acknowledge,” she said. Now, Valentine expects that she will have to help her dad financially when he retires. “If you’re planning to pursue FIRE and you’re going to inherit your parents, you’re going to have to do things a little differently. You can’t just live in a cabin or a tiny house off the grid,” she said.
The frugality-first mindset is also something that the Saunders want to challenge. Initially, the couple took that approach.
“But as a couple, we realized there was a downside to that,” Julien said. They talked to other couples who adopted the principle of being frugal first, and discovered that such mentality can negatively impact their relationships. When Julien tried to adopt a minimalist uniform wardrobe, he found that after a few weeks, it had a negative impact on his ability to be creative and found that his clothes started to get “really frumpy.”
“Like anyone, when I don’t feel confident, it has a negative impact on my ability to connect,” he said. For a period of time, he also held out on getting a new car. “After a while it made family travel a miserable experience because I didn’t have air-conditioning, it had a faulty seat belt and a broken radio,” he said.
They also pointed out that being frugal out of choice is a privilege. For example, Kiersten has talked about the importance of haircare for Black women — something that their white counterparts may consider a discretionary expense. Yet Black women face greater scrutiny in professional settings when it comes to their personal appearance, which often translates to their earning power.
“In our case as entrepreneurs, if we don’t present a certain way, we know the doors are slimmer,” Julien said. “We have to be willing to invest in ourselves in terms of personal care.”
The importance of increasing your income
While mainstream FIRE adherents who practice frugality often focus on spending less, the Saunders and Valentine place emphasis instead on earning more.
Both the Saunders and Valentine spent the beginning of their FIRE journey working full-time jobs while starting their businesses (Kiersten only left her full-time job at the start of 2020 to focus on Rich & Regular). They’re also determined to use their platforms to encourage Black and Latinx communities to generate income outside of traditional employment.
“The reality is, if you look at the internet as a system of commerce, then you start to understand that money can be made outside of your 9-to-5 with less effort than ever before,” Julien said. “That’s why we talk about income; you’ve got to break out of the cycle that [financial independence] is inaccessible because your job won’t give it to you.”
For those who might be struggling with finding extra time in their day, Julien recommended starting a blog.
“Given so much of popular culture is born out of the life experience of POCs, we believe starting a blog is a great way to own and monetize the stories they share with the world,” he said.
He acknowledged that it might not be an “immediate path” to building wealth, but they are “a powerful lever for earning income online,” said Julien. There are different ways to monetize blogs, like selling products or recommending products and services online, he said. “We think of them as digital land ownership,” he said.
Widening the definition of FIRE
At the end of the day, Valentine and the Saunders hope that by sharing their experience, they’re broadening the definition of what it means to pursue FIRE and who the movement is for. This is also something that Delyanne Barros, an employment attorney editor, aims to do through her money and investing coaching business, Master My Fire. Barros discovered FIRE through an online debt-free community and said that when she started, there was “a huge narrative that you have to be 100% debt-free before you can pursue FIRE.”
“That’s just not the reality for a lot of people, especially in the minority community,” she added.
Kiersten also noted that the focus on FIRE needs to shift away from a specific number.
Many FIRE adherents follow the movement with the goal of never having to work again after they retire, but Kiersten argued that that doesn’t have to be the only benefit.
For example, pursuing FIRE has also allowed her to leave a full-time job that affected her mental health. And when COVID-19 upended the world, they were financially prepared.
“[I]t teaches you how to manage your expenses,” Kiersten said.
The Saunders acknowledge that pursuing FIRE alone isn’t going to solve the inequalities and systemic discrimination that make it difficult for the Black and Latinx community to get ahead, but “it’s one option to carve out a little piece of relief,” Kiersten said.
She added, “But the racial wealth gap is caused by policy. And policy is what’s going to get us out of it.”